Nestle Australia’s profits dented by hedging losses

Camera IconMilo, a Nestle product, is a household name in Australia.Picture: Michael O'Brien/The West Australian.

Hedging losses dented profits at Nestlé Australia last year, but the company behind some of the country’s best known food brands still managed to return $151 million in dividends to its Swiss parent.

Nestlé, the multi-national maker of Nescafe, Uncle Tobys, Milo, Kit Kat and Maggi, said “significant” losses across multiple currencies hedged against the stronger Australian dollar contributed to a 12 per cent fall in net profit to $156.9 million in 2016.

However, it also recorded lower prices for its products, with directors citing the impact of “deflationary market conditions” as sales grew just 0.5 per cent to $2.12 billion in the 12 months to December 31.

Nestlé’s financial accounts, which were lodged with the corporate regulator, do not go into detail.

However, 18 months ago, Coles boss John Durkan accused multi-national food companies of overcharging Australian consumers and threatened to replace branded labels with private label goods if price rises were not reined in.

Nestlé, which operates nine factories on the east coast. said the modest sales increase was aided by “improved management of trade terms and accelerated growth initiatives” and various cost-cutting programs.

The subsidiary’s dividend payout to Swiss-based Nestlé SA fell in line with the profit decline, dropping from $187 million in 2015.

As usual, it also declared a final dividend after balance date. At $30 million that payment was down on the $32 million declared last April, suggesting Nestlé’s earnings remain under pressure.

While the amount of tax being paid by some multi-nationals is a sore point in Australia, the Nestlé Australia paid $78.9 million in income tax, in line with the 30 per cent corporate rate.